Good morning, ladies and gentlemen, and welcome to the Similarweb Q3 Fiscal 2025 Earnings Call. Please note that this event is being recorded. I will now hand you over to Rami Myerson. Please go ahead.

Thank you, operator. Welcome, everyone, to our third quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; and our Chief Business Officer, Maoz Lakovski. Yesterday, after market close, we released our results for the third quarter and published a discussion of our results in a letter to shareholders as well as an investor presentation with a strategic overview of the business on our Investor Relations website at ir.similarweb.com. Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements. Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or's highlights of the quarter, and then I will provide an overview of the financials. Then we will open up the call to questions from sell-side analysts. With that, I'll turn the call over to Or. Or, please go ahead.

Thank you, Rami, and welcome, everyone, joining the call today. I'm super proud of the third quarter financial results that we reported yesterday. Revenue increased by 11% year-over-year to $72 million, in line with our expectation. Our customer base grew 15% year-over-year to more than 6,000 ARR customers at quarter end. We reported an eighth quarter of positive free cash flow, and we are reiterating guidance for 2025 revenues and raising our profit guidance for the year. Customer interest in our Gen AI data and solution is amazing, and revenues from our Gen AI data and new solution continue to expand and are one of our fastest-growing revenue streams. We remain focused on 3 high-impact opportunities where Similarweb is highly positioned to lead. The first one is the Gen AI Intelligence. Our Gen AI Intelligence suite has been well received by our customers. In October, we launched Web Intelligence 4.0 that integrates our Gen AI capabilities into our web intelligence solution, providing an even more comprehensive view of the digital world. ARR from the Gen AI Intelligence product is growing rapidly to more than $1 million since the launch in April, a great milestone for this product. The second one is our data selling for LLMs. We are supplying our unique and fresh digital data to companies that are building their own LLM and generative AI applications. And the third one is our AI agent. We continue to roll out AI agents to help our customers maximize the value and automate their workflow, enabling them to extract insights from our data in the shortest time possible. Utilization of our AI agent continues to grow. For example, 27% of our Sales Intelligence customers use our AI meeting prep and our new AI outreach agent with adoption and utilization growing quarter-over-quarter. In September, we launched our new Similarweb MCP server that can deliver trusted digital market intelligence data directly into AI agent and workflows. These new products empower our customers with tools to integrate our digital data insights at scale via LLMs and automation tools, including Claude, Copilot, OpenAI Agent Builder, and more. The MCP is an exciting milestone in our deployment of data-driven AI products and services. I'm super proud of the strong adoption of the Similarweb App Intelligence that we launched in March. At the end of Q3, more than 580 of our customers were using our App Intelligence, and ARR has increased rapidly to above $10 million. Similarweb's digital app data today covers over 4 million iOS and Android apps across 58 countries, providing our clients with comprehensive coverage of data that includes ranking, download, usage, engagement, retention, and audience demographics. The investment in go-to-market that we started in the fourth quarter of 2024 is ramping as planned, and we are starting to see good results. At the end of Q3, we had 30% more sellers than in the third quarter last year, and we are seeing encouraging improvement in yield. I'm super proud that we continue to operate efficiently and reported our eighth quarter of positive free cash flow in Q3, generating $43 million of free cash flow in the past 8 quarters. We remain focused on delivering profitable growth over time as well as achieving our long-term profit and free cash flow targets. I'm super excited that Ran Vered, our new CFO, will join in December. Ran has over 20 years of finance experience and a proven track record of driving growth, efficiency, and strategic transformation. He has worked as a CFO at 3 companies, 2 U.S. traded public companies, and recently in a SaaS enterprise data company. I would like to thank Jason Schwartz for 10 years of service at Similarweb and wish him good luck and success. And as I like to say, we are just getting started. Thank you, everyone, for the call and for your continued support. And with that, I will turn the call back to Rami.

Thanks, Or. I'll provide highlights of our financial performance, and then we'll open the call up to questions. We generated $71.8 million of revenue in Q3, an 11% increase relative to Q3 2024. Revenue growth was driven by the 15% growth in overall customers as well as increased revenues from some of the new products we launched in 2025, including App Intelligence and Gen AI Intelligence. The quarterly growth rate reflects a strong Q3 '24 comparison and the early recognition of LLM evaluation revenues in Q2, which we had originally expected in Q3, as we discussed with you last quarter. We are proud that 58% of our ARR is contracted under multiyear contracts, up from 45% last year. We believe this demonstrates the durability of our revenues and the importance of our data to our customers. We generated $3 million of normalized free cash flow in the quarter, a 4% free cash flow margin, and an eighth consecutive quarter of positive free cash flow. We plan to continue to generate positive free cash flow on a quarterly basis going forward. Our remaining performance obligations, or RPO, totaled $268 million at the end of Q3, up 26% year-over-year. We expect to recognize 68% of total RPO as revenue over the next 12 months. In Q3, overall NRR was 98% across all customers and 105% for customers with over $100,000 of ARR. The decline in NRR reflects strong expansion activity in 2024, particularly from large contracts booked during the second and third quarter of last year. We are very encouraged by the improving trends in GRR that increased sequentially in Q3 and was our highest in 2 years. Moving to guidance for the year. We are reiterating our revenue guidance for the full year 2025 and expect total revenue in the range of $285 million to $288 million, representing 15% year-over-year growth at the midpoint of the range. We are raising our non-GAAP operating profit guidance to between $8.5 million and $9.5 million, an increase from our previous expectation and significantly higher than the guidance we provided at the beginning of the year. This is due to our focus on disciplined execution. With that, Or, Maoz, and I are ready to answer your questions.

Our first question comes from Surinder Thind of Jefferies.

Or, could you maybe just talk about your gross revenue retention? It looks like things are trending in the right direction, but NRR would suggest, even given the tough comps, that maybe the upsell process has been a little bit more challenging. Any color there would be appreciated.

Yes, of course, and thank you for the question. I'm talking about the NRR trend. And so the NRR we report is the average of the 4 last quarters of the past 12 months. And in this past 12 months, a lot of the expansion we're doing is mostly like big part of the big expansion were those engagements on the data for LLMs. And the way this works usually starts as a one-time test that is significant. And then down the road, it's converting into ARR deals. So because a lot of the expansion comes from those in the past 12 months, you don't see it in the NRR because the NRR only reflects ARR deals. So I hope that as many of those pipelines of big deals we have for selling data for LLMs convert into ARR deals going forward, this trend will change and go up down the road.

That's helpful. And then maybe, I guess, since you mentioned kind of the LLMs and the training data partnerships in the pipeline, can you maybe talk about how that's evolving at this point? In the past, you've announced a number of kind of these upfront data purchases that aren't in your ARR. So should we be expecting conversion? Is this something where the clients maybe take 6 months to evaluate whether they want to enter into a longer-term relationship? Or how should we think about what's coming down the pipeline here?

It's an excellent question. Thank you. So indeed, the answer is yes. It's a long process of selling. And when you usually provide a significant chunk of historical data that those companies are trying to use and analyze and prove that it will improve their accuracy of the models. So those processes usually take a long time, and there are many different data sets. Similarweb is a leading digital company in the world. We have so many different data sets that there are many assumptions and so many things we see improve. So there are many tests going on with different companies. So yes, I feel very confident that a majority of those engagements will convert to ARR deals going forward because we already have a few of them that are already in ARR with long-term commitments. So we see the impact; it's driving engagement from other players. So we're very confident that we can drive the impact on all the other players.

Our next question comes from Raimo Lenschow of Barclays.

Perfect. I had 2 questions as well. So first of all, great to see the App Intelligence customer count grow and ARR reaching almost $10 million there. Can you help us understand where these customers are coming from? Are they cross-sell or net new? Like can you speak to that, please? And then I have one follow-up.

Yes, of course, we're very excited about the new product that we launched into the market. So not only the App Intelligence, which is super successful, but also our Gen AI offering that just passed $1 million in record time. Regarding the customers, I think the majority of them are cross-sell. We think that we have more than 6,000 customers that we engage in buying our digital data to increase their market share all across the digital world. So the App Intelligence is spot on for them; they usually have websites and apps. So it's an easy sell. They love us and trust us quickly. So we see significant success. The more we increase the coverage of countries we provide and the metrics, it's going to be very successful. So we’re very happy. We're seeing good success that the products we innovate and build and launch are being adopted by our customers.

Yes. Okay. Perfect. And then if you look at the last question, you talked a little bit about the days in the quarter as well. But if I look at the sequential add this quarter, it was kind of more on the lower side of what we've seen historically. Can you speak a little bit to were there other factors? Or was it just what you mentioned in the first question?

Yes. I think that we think that the execution was good. So I know it's very hard to land exactly where you plan, but we felt that the execution was good. We feel good for the year. Some of the deals are significant, so it's very hard to forecast them. But overall, I think that we really were able to land spot on what we planned. Maybe, Rami, if you have anything to add about that?

Raimo, just to add to that, as you remember, we had some contracts that came in earlier than expected, some of those evaluation contracts in Q2. The phasing isn't linear. So we booked revenues in Q2 earlier than Q3. If we would have booked those revenues in Q3, then the sequential improvement would have been more gradual.

Our next question comes from Ken Wong of Oppenheimer & Co.

This one might build on the response you just gave, Rami. But I just wanted to get thoughts on kind of why the ARPU declined slightly even with the focus on upmarket customers. How are we thinking about the trend on ARPU going forward?

I think that ARPU is impacted by the number of customers that we added. Particularly for the larger customers on the ARR, we added some mainly the large end, some one-time customers. We didn't add, we saw an increase in revenues, whereas a lot of the customers that are crossing the trend are coming through below average, but we expect this to fluctuate over time. What matters most to us is the increase in customer count because that ultimately means that we have a big range of customers that we can sell and upsell to and move them from single products into multi-year products, which allow them to go from single geographies to multi-geographies. As we mentioned in the shareholder letter, we have customers that have increased 6x or 10x over time. Once they're in the pipeline, we can work on them and land and expand and implement our playbook. So quarterly fluctuations or declines or increases are very small and don’t have a significant impact on the way we think about the business.

Okay. Perfect. And then a broader theme, we just wanted to kind of pick your brain on with SEO traffic coming down. I know you guys have some AI tools that are helping customers kind of focus on other channels. But any impact you're seeing in terms of demand for web intelligence and some of your core products with some customers maybe deemphasizing web traffic?

So I think we see a little bit of the opposite. I think that a lot of those digital companies that have a website and now are getting less traffic from SEO need to close those gaps from other channels. They come to us; we are the leading digital company to give visibility to the market. They want to understand how they position if the decrease they see is worse or better than the competition and what actions they need to take to drive more traffic. So for us, those market changes and dynamics only increase the need and demand for the solution we provide.

Yes. I think I would just add that, first, we are following and seeing where the users are, and we are making sure that we are able to track and have a compelling offer, and we are investing a lot in the GEO or AEO offer. Also, it's important to mention that we launched Web Intelligence 4.0, a new pricing schema about a month or 1.5 months ago, and we're seeing initial good signs of monetization of our core products. We are optimistic about it and think that our monetization strategy will ensure that we keep growing our core offering.

Ken, does that conclude your questions?

Yes, it does.

Our next question comes from Arjun Bhatia of William Blair & Company.

I'm Willow Miller on for Arjun Bhatia. I'm curious to hear more about the sales rep ramp that was added a few quarters ago now that we're through the third quarter and into the fourth quarter. In the past, you mentioned you were looking forward to the newer sales resources closing more deals in the back half of the year. Is that playing out?

Yes. So we're seeing an improvement in the go-to-market quarter-over-quarter. Last quarter, we mentioned that we had a record high of salespeople closing deals. This quarter, we saw even higher numbers of salespeople participating in generating revenues. As a CEO, you always want better and bigger. So you're always optimizing the go-to-market to be much stronger and better.

Our next question comes from Tyler Radke of Citi.

So just going back to the results and the guidance. I mean, I think we're used to Similarweb, probably the vast majority of your quarters as a public company, beating the midpoint, if not the entire guidance range and raising at least on revenue. So I just wanted to make sure I understood the dynamics. Certainly, I can appreciate the quarterly dynamics in terms of the revenue that sort of got accelerated last quarter. But just relative to your guide, was it simply deal timing, linearity of the quarter when these deals closed? Are you building in more conservatism just given the CFO transition? Just help us understand sort of the lack of a beat and raise on revenue.

I believe that overall, everything you've mentioned is relevant. At the beginning of the year, we were, and even now we continue to be, very focused on optimizing our margins, particularly the EBITDA margin, as we saw a potential for significant impact there. Our performance in this area has been strong, showcasing efficient and disciplined execution. Thus, this has been our primary focus.

Okay. And then on the margin side, you talked about a pretty healthy growth in the number of sales reps that you had this quarter. But sort of what's driving that incremental raise? Where are you taking costs out? Is it more about not hiring as many sales and marketing people? Is it more R&D and GA? Maybe you're seeing some AI efficiencies in the business? Would love to just hear specifically what's driving the lower costs here for the full year.

I think it's a combination; we decided to improve our metrics and be more disciplined around it. Of course, you have the AI tailwind that is helping increase productivity, so you can run a tight engineering team without growing the R&D resources. Also, around the go-to-market, as you begin to scale, you hire many people to execute, and when some are not performing, you let them go. So basically, you keep the best ones, and they become more productive. This has been the majority of our cost savings efforts.

Our next question comes from Patrick Walravens of Citizens Bank.

Great. This is Kincaid on for Pat. Congratulations on the quarter, guys. I was just curious if you could highlight any customer conversations that you've had around the Gen AI products? And what's really driving uptake with these products?

Yes. I think it's very interesting. The Gen AI optimization product that we sell is a new channel for all of our customers. This channel has been rising this year. Many questions arise about gaining visibility and understanding how to be successful. It's an interesting dynamic because while it may not drive a lot of traffic, I believe a lot of the answers coming from chatbots define customer perceptions of brands and influence purchase decision-making. So it's very important for them to understand how many consumers are asking about their brand, what the sentiment is. As you work with customers, you essentially build and develop the product they need to be successful in this new channel.

Kincaid, this is Rami here. If I can just jump in. We’ve had some meetings with leadership coming back from discussions with a range of customers around the U.S. and worldwide. There’s general excitement in the business regarding the opportunities. C-suite executives are keen to understand how Gen AI is impacting their businesses. On the other hand, all leading LLMs are interested in how the data we provide them can help improve their modeling. When we combine those two parts of the market, the interest from model generators and creators and from corporates being impacted by and disrupted by AI, it really excites us about the opportunities ahead.

Our next question comes from Luke Horton of Northland Securities.

I just wanted to talk a little bit about the customer side. Are you seeing any mix shift between enterprise versus mid-market customers, especially with the new use cases and product launches that you have made over the past year?

Not really. I think the mix between SMB and enterprise remained the same. We didn't observe any change in that.

Fair enough. And then just piggybacking off of that regarding the competitive landscape. Have you seen an uptick in competition, especially with a couple of other companies out there doing a similar cadence of new product launches and trying to capture this Gen AI demand? Just curious about your thoughts on the overall competitive landscape.

Yes, Maoz here, thank you for the question. We have a lot of interest and demand for our Gen AI products, but we are confident that we can be a dominant player in this space. We have unique data sets that enable us to be the best solution in this field. We have great client relationships, and we receive a lot of demand from both new prospects and existing clients. It’s a very horizontal play. Many of our clients across brands, agencies, and publishers all care about Gen AI visibility. So we are not too concerned. We are focusing on building a great product. We have a robust data set, and we are really allowing brands to understand visibility within the engines. Our focus is more on market growth and education rather than on this competitor or that competitor at this point.

Okay, fair enough. Just one last one here. Apologies if this one has already been asked and answered, but looking at the implied revenue guidance for Q4, it's sort of a wider band here. Wondering if that's kind of more due to uncertainty around the timing of some of the larger deals flowing through or just kind of the considerations for the implied Q4 revenue guidance.

Yes. It's mainly because we have a very strong pipeline with significant deals. We want to keep it in that range to ensure we understand where we'll end; we feel confident we'll land in that range, but want to see how it materializes.

Our next question comes from Adam Hotchkiss of Goldman Sachs. It's mainly because we have a very strong pipeline with significant deals. We want to keep it in that range to ensure we understand where we'll end; we feel confident we'll land in that range, but want to see how it materializes.

I just wanted to ask about your RPO metric that was strong for a second consecutive quarter here. Could you comment on contract duration and how we should think about the interplay of revenue growth versus that higher RPO growth rate?

Yes. Thank you, Adam, for your questions. Indeed, we’re seeing good success with multiyear commitments. More and more of our customers are valuing our products, monetizing them, getting great ROI from them, and are willing to engage with us for the long term. As we reported, we now have 58% of our revenue secured under multiyear contracts, which we are very proud of. This metric is a strong indication of the value of the data we provide to our customers. With that success, and every quarter getting better, more customers are engaging with us, which also helps improve our RPO.

Great. That's really helpful. And then just on sales and marketing, I appreciate the comments on the ramping of sales employees. I noticed that sales and marketing expense did come in a little light of expectations this quarter and sequentially, which I think was part of the profit outperformance. I know we had talked about taking a real-time approach to sales rep productivity and trying to understand that relative to margin performance, particularly when you gave the guide earlier this year. Could you comment on any changes in what you're seeing there and if anything flowed through the sales and marketing number in Q3 that we should be aware of?

Yes. The ramp-up of the salespeople is on track. When you scale a go-to-market organization, what we did in Q1 was to overhire in many areas to ensure we could ramp the people and have options to double down on the ones that are successful. So the process involves a bit of overhiring, seeing who succeeds, and then optimizing and letting go of those who are less successful. As you do that, your selling and marketing becomes better, and you begin to derive greater yield from the salespeople. This is what you are seeing in the numbers.

Our next question comes from Patrick Walravens of Citizens.

Can I ask 2 follow-ups? First of all, what kind of big deals do you have in the pipeline? What are the very big deals? Obviously, not the companies, but just like if you could characterize them? And then secondly, how should we think about next year?

So I will try to answer what I heard because I think the line was not super clear. I think the first question was about the big deals we have. As we said over the past few quarters, we're seeing significant success in selling data for LLM companies or those trying to create the best LLMs for this new AI world. Our digital data is a critical element in building and training those LLMs. Once we engage and show the value of our data after those lengthy evaluation processes, we gain very solid engagement that is sticky and long-term, making us a critical part of building and developing those LLMs. The second question I think is about next year; we'll provide guidance for next year in the next quarter.

Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question-and-answer session. I will hand back over to Or Offer for closing comments.

I would like to thank you all for joining the call and especially our shareholders for their support. We look forward to speaking to you again over the coming weeks. Thank you all.

Lovely. Thank you very much, sir. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.